Marginal note:Ceasing to be a borrowing member

77. A first nation may cease to be a borrowing member only with the consent of all other borrowing members.

Marginal note:Priority

• 78. (1) The Authority has a priority over all other creditors of a first nation that is insolvent, for any moneys that are authorized to be paid to the Authority under a law made under paragraph 5(1)(b) or (d).

• Marginal note:Debts to the Crown

  (2) For greater certainty, subsection (1) does not apply to Her Majesty.

Marginal note:Limitations — infrastructure loans

79. The Authority shall not make a long-term loan to a borrowing member for the purpose of financing capital infrastructure for the provision of local services on reserve lands unless

• (a) the First Nations Tax Commission has approved a law made by the borrowing member under paragraph 5(1)(d); and

• (b) the loan is to be paid out of the property tax revenues of the borrowing member in priority to other creditors of the borrowing member.

Marginal note:Restriction on financing

80. A borrowing member shall not obtain long-term financing secured by property tax revenues from any person other than the First Nations Finance Authority.

Marginal note:Limitations — short-term loans

81. The Authority shall not make a short-term loan to a borrowing member for a purpose described in subparagraph 74(a)(iii) unless the loan is made in anticipation of local revenues of the borrowing member set out in a law made under paragraph 5(1)(b).

Marginal note:Sinking fund

• 82. (1) The Authority shall establish a sinking fund, or any other system of repayment prescribed by regulation, to fulfil its repayment obligations to the holders of each security issued by the Authority.

• Marginal note:Separate accounts

  (2) Where a sinking fund is established, a separate sinking fund account shall be kept for each borrowing member participating in a security issued by the Authority.

• Marginal note:Sinking fund investments

  (3) Funds in a sinking fund may be invested only in

  • (a) securities issued or guaranteed by Canada or a province;

  • (b) securities of a local, municipal or region­al government in Canada;

  • (c) investments guaranteed by a bank, trust company or credit union; or

  • (d) deposits in a bank or trust company in Canada or non-equity or membership shares in a credit union.

Marginal note:Surpluses

• 83. (1) The Authority may declare a surplus in a sinking fund and use the surplus, in order of priority, to

  • (a) replenish any amounts paid out of the debt reserve fund; and

  • (b) make a distribution to borrowing members who are participating in that fund.

• Marginal note:Recovery from sinking fund

  (2) The Authority may recover fees payable by a borrowing member from any surplus to be distributed to that member under paragraph (1)(b).

Marginal note:Debt reserve fund

• 84. (1) The Authority shall establish a debt reserve fund to make payments or sinking fund contributions for which insufficient moneys are available from borrowing members.

• Marginal note:Provisioning of fund

  (2) Subject to the regulations, the Authority shall withhold 5% of the amount of any long-term loan to a borrowing member for financing capital infrastructure for the provision of local services on reserve lands and deposit that amount in the debt reserve fund.

• Marginal note:Separate account

  (3) A separate account shall be kept for each security issued and for each borrowing member contributing to the debt reserve fund.

• Marginal note:Investments

  (4) The funds of the debt reserve fund may be invested only in securities, investments or deposits referred to in paragraph 82(3)(a), (c) or (d) that mature or are callable within five years, 25% of which must be callable within 90 days.

• Marginal note:Liability for shortfall

  (5) If payments from the debt reserve fund reduce its balance

  • (a) by less than 50% of the total amount contributed by borrowing members, the Authority may, in accordance with the regulations, require all borrowing members to pay amounts sufficient to replenish the debt reserve fund; and

  • (b) by 50% or more of the total amount contributed by borrowing members,

    • (i) the Authority shall, in accordance with the regulations, require all borrowing members to pay without delay amounts sufficient to replenish the debt reserve fund, and

    • (ii) the borrowing members shall recover those amounts under their property taxation laws.

• Marginal note:Repayment

  (6) Money contributed by a borrowing member to the debt reserve fund and investment income received on it shall be repaid by the Authority to the borrowing member when all obligations in respect of the security in respect of which the money was contributed have been satisfied.

Marginal note:Credit enhancement fund

• 85. (1) The Authority shall establish a fund for the enhancement of the Authority’s credit rating.

• Marginal note:Investments

  (2) The funds of the credit enhancement fund may be invested only in securities, investments or deposits referred to in paragraph 82(3)(a), (c) or (d) that mature or are callable within five years, 25% of which must be callable within 90 days.

• Marginal note:Investment income

  (3) Investment income from the credit enhancement fund may be used

  • (a) to temporarily offset any shortfalls in the debt reserve fund;

  • (b) to defray the Authority’s costs of operation; and

  • (c) for any other purpose prescribed by regulation.

• Marginal note:Capital

  (4) The capital of the credit enhancement fund may be used

  • (a) to temporarily offset any shortfalls in the debt reserve fund; and

  • (b) for any other purpose prescribed by regulation.

Marginal note:Default by first nation

• 86. (1) If a borrowing member fails to make a payment to the Authority, to fulfil any other obligation under a borrowing agreement with the Authority or to pay a charge imposed by the Authority under this Part, the Authority shall

  • (a) notify the borrowing member of the failure; and

  • (b) send a notice of the failure to the First Nations Financial Management Board and the First Nations Tax Commission, together with evidence of the failure and a copy of any relevant documents and records.

• Marginal note:Requirement for report

  (2) If a failure referred to in subsection (1) relates to an obligation other than payment, the Authority may require that the First Nations Financial Management Board review and report on the reasons for the failure.

• Marginal note:Report

  (3) On receipt of a notice referred to in paragraph (1)(b) in respect of a failure related to an obligation other than payment, the First Nations Financial Management Board shall advise the Authority in writing of its opinion on the reasons for the failure and recommend any intervention under section 52 or 53 that it considers appropriate.

• Marginal note:Required intervention

  (4) The Authority may, by notice in writing, require the First Nations Financial Management Board to either — at the Board’s discretion — impose a co-management arrangement on a borrowing member or assume third-party management of the first nation’s local revenues

  • (a) where the borrowing member fails to make a payment to the Authority under a borrowing agreement with the Authority, or to pay a charge imposed by the Authority under this Part; or

  • (b) on receipt of a report of the Board under subsection (3) in respect of the borrowing member.

Marginal note:Short-term pooled investment funds

• 87. (1) The Authority may establish short-term pooled investment funds.

• Marginal note:Investments

  (2) Funds in a short-term pooled investment fund may be invested only in

  • (a) securities issued or guaranteed by Canada, a province or the United States;

  • (b) fixed-term deposits, notes, certificates or other short-term paper of, or guaranteed by, a bank, trust company or credit union, including swaps in United States currency;

  • (c) securities issued by the Authority or by a local, municipal or regional government in Canada;

  • (d) commercial paper issued by a Canadian company that is rated in the highest category by at least two recognized security-rating institutions;

  • (e) any class of investments permitted under an Act of a province relating to trustees; or

  • (f) any other investments or class of investments prescribed by regulation.

General

Marginal note:Annual report

• 88. (1) The Chairperson shall, within four months after the end of each fiscal year, submit to the Authority’s members and the Minister a report of the operations of the Authority for that fiscal year.

• Marginal note:Contents

  (2) The annual report shall include the financial statements of the Authority and its auditor’s opinion on them.

Regulations

Marginal note:Regulations

89. The Governor in Council may, on the recommendation of the Minister after consultation by the Minister with the Authority, make regulations

• (a) prescribing anything that is to be prescribed under subsection 82(1) and paragraphs 85(3)(c) and (4)(b) and 87(2)(f);

• (b) increasing or decreasing the amount to be withheld from a loan under subsection 84(2);

• (c) respecting the imposition of charges under subsection 84(5), including the manner of calculating those charges and the share of those charges to be paid by each borrowing member; and

• (d) extending the application of this Part to any non-profit organization established to provide social welfare, housing, recreational or cultural services to first nations or their members on reserve lands and making any adaptations to the provisions of this Act that are necessary for that purpose.